Post by ck4829 on Dec 8, 2016 11:47:27 GMT
We interrupt this holiday season to revisit the minimum-wage experiment going on in various cities and states, paying special attention to those opposed to plans by some locales to eventually adopt a $15 hourly wage.
The forecasts of these critics -- that jobs would be lost and businesses would close -- have, so far, been proven wrong. Although this is interesting, what's most important is why they were wrong. In many cases, they suffer from the sort of systemic bias that is typically observed in the self-destructive tendencies of too many investors. To many of these minimum-wage foes, government can do no right, and any effort to ameliorate some of the defects or inefficiencies in the free market will always and everywhere prove counterproductive.
The modern minimum-wage debate traces back to the seminal 1993 research by Alan Krueger and David Card. The two economists looked at employment in the fast-food industry when minimum wages were raised in one market but not in the adjacent market. Their studies found no reduction in job growth in the market where pay was increased, and in fact, the opposite occurred. Many subsequent studies confirmed their findings -- modest increases in minimum wages don't lead to job losses.
The economic impact of modest increases in the minimum wage may be well-established, but you wouldn't know this based on the claims of opponents. When you begin your analysis with an ideological belief, the usual selective perception and confirmation bias that we have discussed so often in these pages is inevitable.
How else can we explain why even before minimum-wage increases went into effect the critics were already assigning blame for rising unemployment? This began a seemingly endless back and forth between those who were reviewing the actual data as it came in and those who a priori knew the outcome. It should come as no surprise that the data-oriented folks were much more accurate in their assessments than the people working off ideological assumptions.
Consider as an example what Mark Perry, at the American Enterprise Institute, wrote a month before the first phase of Seattle's new minimum-wage law went into effect. The city's "government-mandated wage floor … guarantees reduced employment opportunities for many workers."
My colleague Josh Frankel -- one of those who relies on data -- observed last week that the "unemployment rate in the city of Seattle - the tip of the spear when it comes to minimum wage experiments - has now hit a new cycle low of 3.4%." Meanwhile, a University of Washington study on the minimum wage law found little or no evidence of job losses or business closings.
www.chicagotribune.com/news/sns-wp-blm-ritholtz-099587d0-bcaa-11e6-ae79-bec72d34f8c9-20161207-story.html
The forecasts of these critics -- that jobs would be lost and businesses would close -- have, so far, been proven wrong. Although this is interesting, what's most important is why they were wrong. In many cases, they suffer from the sort of systemic bias that is typically observed in the self-destructive tendencies of too many investors. To many of these minimum-wage foes, government can do no right, and any effort to ameliorate some of the defects or inefficiencies in the free market will always and everywhere prove counterproductive.
The modern minimum-wage debate traces back to the seminal 1993 research by Alan Krueger and David Card. The two economists looked at employment in the fast-food industry when minimum wages were raised in one market but not in the adjacent market. Their studies found no reduction in job growth in the market where pay was increased, and in fact, the opposite occurred. Many subsequent studies confirmed their findings -- modest increases in minimum wages don't lead to job losses.
The economic impact of modest increases in the minimum wage may be well-established, but you wouldn't know this based on the claims of opponents. When you begin your analysis with an ideological belief, the usual selective perception and confirmation bias that we have discussed so often in these pages is inevitable.
How else can we explain why even before minimum-wage increases went into effect the critics were already assigning blame for rising unemployment? This began a seemingly endless back and forth between those who were reviewing the actual data as it came in and those who a priori knew the outcome. It should come as no surprise that the data-oriented folks were much more accurate in their assessments than the people working off ideological assumptions.
Consider as an example what Mark Perry, at the American Enterprise Institute, wrote a month before the first phase of Seattle's new minimum-wage law went into effect. The city's "government-mandated wage floor … guarantees reduced employment opportunities for many workers."
My colleague Josh Frankel -- one of those who relies on data -- observed last week that the "unemployment rate in the city of Seattle - the tip of the spear when it comes to minimum wage experiments - has now hit a new cycle low of 3.4%." Meanwhile, a University of Washington study on the minimum wage law found little or no evidence of job losses or business closings.
www.chicagotribune.com/news/sns-wp-blm-ritholtz-099587d0-bcaa-11e6-ae79-bec72d34f8c9-20161207-story.html